Case Digest (G.R. No. 193893-94)
Facts:
The case at hand involves Land Bank of the Philippines (Landbank) as the petitioner and Megaworld Corporation (Megaworld) as the respondent. The dispute arises from a property development contract initiated in 1995, which required Megaworld to construct a 35-storey building known as the Landbank Plaza on a parcel of land owned by Landbank in Malate, Manila. By 1999, Megaworld notified Landbank regarding the project's completion; however, Landbank failed to issue a certificate of completion and only released partial funds amounting to P168 million based on a 96.7586% accomplishment rate. Despite occupying the premises almost three years later, Landbank did not settle the total outstanding balance, leading Megaworld to demand payment of retention money and compensation for various additional works performed. When these demands were ignored, Megaworld filed a claim in the Construction Industry Arbitration Commission (CIAC). In response, Landbank counterclaimed for reimbursemen
Case Digest (G.R. No. 193893-94)
Facts:
- Parties and Contract Background
- Land Bank of the Philippines (Landbank) is the registered owner of a 12,739.30–square meter parcel of land in Malate, Manila.
- Megaworld Corporation (Megaworld) entered into a property development contract with Landbank in 1995.
- Under the agreement, Megaworld undertook to construct a 35‐storey building—later known as Landbank Plaza—to serve as Landbank’s corporate headquarters.
- The project also included plans for a first–class commercial and residential condominium complex.
- Project Execution and Payment Issues
- Megaworld notified Landbank in 1999 that the construction was complete.
- Despite completion, Landbank did not issue a certificate of completion and acceptance.
- Instead, Landbank released only PI68 million from the retention money, based on an accomplishment rate of 96.7586%.
- Landbank fully occupied the project almost three years after Megaworld’s notice of completion.
- Matters escalated when Megaworld insisted that Landbank had not settled its balance in full, leading to further claims.
- Claims and Counterclaims
- Megaworld’s Claims
- Demanded the retention money amounting to 10% of every progress billing.
- Claimed payment for various change orders and rectification works performed between July 1999 and August 2002.
- Landbank’s Counterclaims
- Denied liability for some of Megaworld’s claimed change orders.
- Asserted that it had performed additional works at its own expense in response to Megaworld’s delay in rectifying reported defects.
- Employed other contractors such as Landbank Realty and Development Corporation (LRDC) and Professor Torsten Calvi Corporation (PTCC) for completion.
- Demanded reimbursement for the costs incurred, as well as exemplary damages and attorney’s fees.
- The dispute was initially submitted to the Construction Industry Arbitration Commission (CIAC) under agreed Terms of Reference (TOR).
- CIAC Proceedings and Evidence Issues
- The TOR mandated the presentation of testimonial evidence through affidavits accompanied by all identified documentary evidence.
- Both parties submitted their affidavits, witness exhibits, and offers of documents.
- During the hearing that began on October 22, 2007, Landbank attempted to submit additional documents on October 30, 2007 without prior furnishing to Megaworld.
- The CIAC initially denied the admission of the additional documents as they violated Section 13.9, Rule 13 of the Revised Rules of Procedure Governing Construction Arbitration.
- Landbank moved for reconsideration, arguing that it had substantially complied with:
- Manifesting its intention to submit the additional documents.
- Not receiving any objection from Megaworld.
- Serving copies to Megaworld’s counsel.
- Filing the documents within five days after the hearing.
- The fact that some documents were already identified and admitted during witness testimonies.
- The CIAC granted the motion on December 15, 2007, thereby admitting the additional documents.
- CIAC Award and Subsequent Modifications
- Original CIAC Award (December 21, 2007)
- Recognized Megaworld’s claims totaling P77,820,406.03.
- Recognized Landbank’s counterclaims amounting to P70,820,738.44.
- Computed a net award of P6,999,667.59 in favor of Megaworld.
- CIAC Amended Award (January 28, 2008)
- Adjusted Landbank’s counterclaims upward to P71,640,607.82.
- Reduced the net award to Megaworld to P6,179,798.21 after modifications that affected:
- Rectification works on the curtain wall, punched windows, and the ground floor glass curtain wall.
- Costs for electrical works for the telephone system.
- Rectification works on the parking area slope.
- The computation details included specific deductions from Megaworld’s claim and adjustments based on additional costs and disputed items.
- Appeal to the Court of Appeals (CA) and Judicial Modifications
- Both parties appealed the CIAC award.
- The CA modified the net award in favor of Megaworld to P35,779,501.32 by altering:
- The cost allocated to rectification works for the curtain wall and related elements.
- The inclusion of the cost for electrical works for the telephone system—deleted by the CA.
- The cost for rectification works on the slope of the parking areas—deleted by the CA.
- These modifications became the subject matter of Landbank’s appeal to the Supreme Court.
Issues:
- Whether the Court of Appeals committed reversible error in deleting the total amount of P16,200,000.00 representing the CIAC–computed claim for rectification costs for the slope to drain concrete topping at parking areas and deck slab in favor of Landbank.
- Whether the Court of Appeals committed reversible error in materially reducing the CIAC-awarded claim of Landbank on the rectification of the glass curtain walls and in upholding the denial of the claim for consultant fees.
- Whether the Court of Appeals committed reversible error by deleting the CIAC-awarded claim of Landbank for the cost of electrical work for the telephone system amounting to P4,717,619.28.
- Whether the Court of Appeals committed reversible error in upholding the CIAC’s ruling awarding the amount of PHP58,507,095.16 to Megaworld as the balance of the original contract price despite Megaworld’s failure to attain 100% completion.
- Whether the Court of Appeals properly applied the law on temperate damages on Megaworld’s claim for forced work suspension in the amount of PHP2,520,000.00.
- Whether the Court of Appeals properly applied Article 1724 of the New Civil Code regarding Landbank’s claim for:
- Waterproofing at basement flooring (PHP5,549,847.53).
- ARAD system (PHP1,587,000.00).
- Installation cost for sprinkler head droppings (PHP2,849,309.18).
- Stainless steel cladding (PHP468,378.67).
- Portable fire extinguishers and exit lightings (PHP4,312,000.00 and PHP225,342.00, respectively).
- Replacement of metal doors and door hardware (PHP2,609,538.00).
- Whether the Court of Appeals properly interpreted the contract on the Contractors All Risk Insurance (CARI) coverage when it denied Landbank’s claim for earthquake damage on walls amounting to PHP4,753,017.79.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)